Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Which of the following is a good reason to choose a 30-year bond investment over a shorter-term security?

To ensure quick access to invested funds

To minimize exposure to interest rate risk

To avoid any fluctuations in market value

To potentially earn higher interest income over a longer period

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Verified step by step guidance

Understand the nature of bond investments: Bonds are fixed-income securities that pay interest periodically and return the principal at maturity. Longer-term bonds typically offer higher interest rates compared to shorter-term securities due to the increased risk associated with holding the investment for a longer period.

Analyze the options provided in the question: Each option represents a potential reason for choosing a 30-year bond investment. Evaluate each option based on the characteristics of long-term bonds.

Option 1: 'To ensure quick access to invested funds' - This is not a valid reason for choosing a 30-year bond because long-term bonds are not designed for quick liquidity. Short-term securities are better suited for quick access to funds.

Option 2: 'To minimize exposure to interest rate risk' - This is incorrect because longer-term bonds are more sensitive to interest rate changes, increasing exposure to interest rate risk compared to shorter-term securities.

Option 3: 'To potentially earn higher interest income over a longer period' - This is the correct reason. Longer-term bonds generally offer higher interest rates, allowing investors to earn more interest income over the bond's duration.